By: Dr. Atef Al-Shabrawy
Over the past decades, Saudi Arabia has gone through radical transformations in its economic approach, shifting from near-total reliance on oil to building a diversified economy that relies on local and international investments in specific sectors, and utilizing geopolitical influence in investment choices and the relative and absolute advantages it possesses.
One of Saudi Arabia’s most important relative advantages is its strategic location at the crossroads of three continents; its position as the world’s largest oil exporter and one of the most influential energy markets; its status as a powerful leader in the Arab and Islamic worlds; and its strong presence in the global financial and economic institutions as well as humanitarian and charity organizations.
These factors have boosted the Kingdom’s ability to build economic relations based on a unique model that achieves an unprecedented developmental resurgence.
Attracting Investments
In a matter of few years, Saudi Arabia succeeded in leveraging the tools of international policy and diplomatic relations, in addition to its geopolitical standing, to attract investments and establish its position as a global hub for trade and economic development.
This was a direct outcome of Vision 2030, which put forward a strategic blueprint for a more balanced economic future relying on innovation and sustainable development.
I recall that, when I participated with the Centennial Fund in developing the entrepreneurial environment for youth in the Kingdom, I observed firsthand the opportunities granted to young Saudi entrepreneurs through their participation in the G20’s Young Entrepreneurs’ Alliance (G20 YEA).
These included the interaction with young entrepreneurs from developed nations, and the attendance of an annual summit held before the Leaders’ Summit to promote youth entrepreneurship policies and support their role in economic growth.
Moreover, I observed the remarkable progress in Saudi Arabia’s foreign policy with regards to diversifying the national economy and consolidating foreign direct investment (FDI) in local and international technology startups.
Economic Development Fields
The methodologies for employing economic diplomacy have become integral to the Kingdom’s strategy to achieve economic development across several areas:
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First: Building Bilateral and Multilateral Economic Partnerships
This includes forging economic and investment partnerships with the US, China, India, South Korea and European countries. As a result, this has provided an environment that allows for expertise exchange in accessing global capital and the transfer of advanced technology into Saudi Arabia.
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Second: Enhancing Global Presence
Saudi Arabia has become an influential player within the G20 and the global economic and international energy organizations – not only oil exporters. This has enhanced its status as a key economic player and opened the door for the flow of FDI.
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Third: Leveraging Soft Economic Power
The Kingdom has utilized its strategic weight in the Arab and Islamic worlds to expand its economic reach and ensure its presence in the international markets as an ambassador for Arabs and Muslims.
According to FocusEconomics, the average FDI flow has steadily increased over the past decade since 2020, and in 2021, it amounted to around $28.4 billion. This was reflected in Saudi Arabia’s rankings in FDI measurement indices.
Furthermore, the Arab Investment & Export Credit Guarantee Corporation (Dhaman) 2022 report indicates that Saudi Arabia ranked second among Arab states, after the UAE, with cumulative flows that accounted for approximately one-third of the total FDI in Arab countries.
Diversifying National Economy
The Kingdom is utilizing international relations in a greater strategic mission, which is the diversification of the national economy.
In the light of this, Saudi Arabia’s economic policy has focused on non-oil sectors, creating a more balanced and sustainable economic base, including the sectors of tourism, entertainment and sports.
This aligns with the launch of mega-projects, such as NEOM, The Red Sea, AlUla and Qiddiya, establishing the Kingdom as a new player in global tourism with an annual target of 100 million visitors.
Millions of Tourists
According to the Saudi Tourism Ministry’s data, the number of tourists has reached 109.3 million, including approximately 28 million international visitors and the remainder being domestic.
Moreover, the World Travel & Tourism Council (WTTC) revealed in its 2024 report that international visitors expenditure increased by 57%, reaching SAR 230 billion. Meanwhile, domestic tourist expenditure recorded 21.5%.
Domestic tourism attracted hundreds of thousands of Saudis who used to spend billions on outbound tourism. Also, the number of local and foreign workers in the tourism sector increased into 1 million by the end of 2024.
Mining and Natural Resources
The methodology also focused on a promising sector in the Saudi economy; mining and non-oil natural resources. Saudi Arabia accounts for one of the world’s largest unexploited mineral reserves, including gold, copper, phosphate and lithium.
Hence, in 2020, the Kingdom issued the Mining Investment Law to regulate the sector and encourage local and foreign investment.
In fact, the national company Maaden is working extensively on phosphate, aluminum, and base metals projects, in cooperation with international partners such as Alcoa.
The Saudi government also announced incentive-based investments supporting the exploration sector. This includes exploration expenditure exceeding $280 million in 2024, and the rise in the number of exploring companies from 6 in 2020 to approximately 226 in 2024 – a clear indication of an acceleration of local investments and projects ready for launch.
Digital Economy
The Saudi diplomacy prioritizes the digital economy, which has experienced an unprecedented growth. In this regard, the Kingdom has injected massive investments in artificial intelligence (AI), cloud computing, FinTech, cybersecurity, and the gaming industry.
Moreover, Riyadh has cemented its position as a growing regional hub for the sector’s startups. The number of visitors to major entrepreneurship and startup events in the Kingdom, such as LEAP, has increased. In 2023, LEAP received more than 172,000 visitors. This number jumped to 215,000 visitors in its 2024 edition.
Renewable Energy and Green Hydrogen
The renewable energy and green hydrogen sector plays a pivotal role in attracting international investments into pioneering projects in the fields of solar energy, wind energy, and green hydrogen, in collaboration with the Public Investment Fund (PIF).
The PIF is one of the Kingdom’s most important international economic policy tools and one of the largest sovereign wealth funds in the world, investing in strategic global companies across the fields of technology, electric vehicles (EVs), space, and sports.
Furthermore, the PIF acquires influential stakes in future sectors, boosting Saudi Arabia’s international economic influence, and supporting the mission of economic diversification through major national projects and by bridging the relationship between domestic and foreign investment.
Through these investments, the PIF has become a platform for global influence, establishing Saudi Arabia’s economic presence in multiple regions worldwide.
It is now indisputable that the Kingdom’s growing diplomatic strategies and pivotal mediation in global affairs are strongly driving its economic development and transformation.
They are also paving the way toward greater innovation, diversification, and empowerment for Saudi citizens, producing a new model of international diplomacy from which the world can learn.
About the author:
Dr. Atef Al-Shabrawy is an expert in sustainable development, entrepreneurship, and innovation.
